Republican turmoil may take US over cliff

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JUST OVER three weeks remain before we reach the edge of the fiscal cliff, and in the perverse logic of how Washington functions these days, everything appears to be right on track. Disaster looms in the form of the cliff’s $607 billion of tax increases and spending cuts set to take effect at year’s end. Unless Congress acts to stop it, the Congressional Budget Office says, the country will slide back into recession. Cable news stations are running countdown clocks. Both sides are bickering and pointing fingers, taking turns being “outraged” and “saddened,” and generally acting out the Kabuki ritual that presages every big Washington deal.

Most people don’t seem very worried. Markets rose this week. Citizens aren’t freaking out over the impending tax hikes. And the deal likely to be struck seems obvious, even beneficial: higher taxes on the rich in exchange for long-term entitlement reform to bring the budget back into balance.

But the serene confidence that all will work out for the best may be misplaced. It rests on the assumption that Republicans will recognize their weak bargaining position and their opportunity to achieve long-sought entitlement reforms next year, and break from a rigid doctrine that has forbidden any and all tax increases. A few, like Oklahoma Representative Tom Cole, have done so. But the vast majority of House Republicans, whose assent will be necessary to steer clear of the cliff, have not. And their record over the last few years of acting for the common good — and for their own good — is anything but confidence-inspiring.

The optimistic view is that the election settled, for now, the ideological battle between President Obama and Republicans over taxes, and that it is therefore only a matter of time until conservatives grudgingly submit. But another battle is playing out in Washington, largely behind the scenes, which makes reconciliation more difficult — and maybe impossible.

That battle is between the establishment Republicans like Cole and House Speaker John Boehner and the new conservative activists who have held sway for the past two years and are not yet prepared to capitulate to Obama’s demand for higher tax rates.

Boehner himself, who was routinely emasculated by the conservative newcomers in the last Congress, touched off the conflict last month by replacing the head of the Republican Study Committee, Representative Jim Jordan of Ohio, with Representative Steve Scalise of Louisiana. The Republican Study Committee is the lodestar of the conservative right, and Jordan had frequently challenged Boehner. But the elevation of Scalise, whom conservatives view as more loyal to the Republican leadership than to principle, has angered many of the committee’s more than 160 members.

Then, last week, Boehner stripped four dissident members of plum assignments, removing Representatives Tim Huelskamp of Kansas and Justin Amash of Michigan from the House Budget Committee and Representatives Walter Jones of North Carolina and David Schweikert of Arizona from the House Financial Services Committee.

This power play is unfolding as conservatives are still coming to terms with their November losses.

This power play is unfolding as conservatives are still coming to terms with their November losses and the reality that Obama now has most of the leverage. But at the same time, many were comfortably reelected after promising to hold the line on taxes. So the deal that most people are expecting requires these conservatives to commit what many of them consider an inexpiable sin — raising taxes — and at the behest of a speaker who is systematically purging them from positions of power.

Right now, many are despondent, and none seems able to come up with a solution that their side can easily embrace. A top conservative leader who has been taking the temperature of this caucus described them to me as “chickens running around with their heads cut off.” It’s possible that they will come around before Dec. 31. But it’s no sure thing. Most of these members agree, the leader said, that if an acceptable solution doesn’t take shape, the best thing to do will be to “fall back on principle” — that is, block the tax hike and take the country over the cliff.

Joshua Green is national correspondent at Bloomberg Businessweek. Follow him on Twitter @JoshuaGreen.